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December 9, 2024 (Maple Hill Syndicate) Can you buy a stock with red-hot earnings growth for a modest price?
You can, but only if most investors think its growth streak is ended, or is about to end.
That's the idea behind my Bunny Portfolio, now going into its 24th year. To get into this hypothetical portfolio, a stock must have five-year historical earnings growth of 25% a year or better, yet the stock price must be 12 times earnings or less.
The stocks are selected by a formula, not by judgment. It's a ten-stock portfolio, featuring the fastest growers and the cheapest stocks in the qualifying group.
The moniker Bunny Portfolio is a tip of the hat to the Energizer Bunny, which in commercials is still going long after you would have expected it to keel over.
Over 23 years, the Bunny Portfolio has averaged a 15.5% return, nicely above the 10.9% figure for the Standard & Poor's 500 Total Return Index over the same periods.
Bear in mind that my column results are hypothetical and shouldn't be confused with results I obtain for clients. Also, past performance doesn't predict the future.
Of my 23 previous Bunny Portfolios, 15 have been profitable, but only 11 have beaten the S&P 500. And now can you smell the carrots? here comes the 24th Bunny Portfolio.
A-Mark
A-Mark Precious Metals Inc. (NASDAQ:AMRK), doesn't mine precious metals; it deals in them, wholesaling gold, silver, platinum, copper and palladium. Its profits have grown by more than 63% a year over the past five years, but fall badly last year. The stock, at $29, is at about the same level as three years ago.
Academy Sports
Back on the Bunny list for a second straight year is Academy Sports and Outdoors Inc. (NASDAQ:ASO), which sells hunting, fishing and sports equipment and related clothing. Based in Katy, Texas, Academy has grown its profits by an average of 86% a year over the past half-decade.
Atkore
Atkore Inc. (NYSE:ATKR), which is headquartered in Harvey, Illinois, makes electrical conduit, security bollards (used to block cars from entering certain spots) and other industrial products. The stock trades for only seven times recent earnings.
Cal-Maine Foods
Another returning member of the Bunny Portfolio is Cal-Maine Foods Inc. (NASDAQ:CALM), the largest U.S. egg producer. The company, with headquarters in Ridgeland, Mississippi, has no debt and is a generous dividend payer in good years. Its profits are often influenced by avian flu and by corn (chicken feed) prices.
Conduent
Conduent Inc. (NASDAQ:CNDT), out of Florham Park, New Jersey, provides digital payment services. It was spun out of Xerox Corp. in 2017. This stock has been a poor performer, down about 37% in the past five years. It is barely followed on Wall Street, but the three analysts who do cover it rate it a buy.